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Business Entity Comparison, C-Corp vs. S-Corp
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Frequently Asked Questions

Frequently Asked Questions - Corporations

 

Frequently Asked Questions - Limited Liability Companies

 

Frequently Asked Questions – Nevada





Frequently Asked Questions - Corporations

What is a corporation?
A corporation is a legal entity formed in compliance with statutory requirements of the state. The entity is distinct, separate and apart from its owners, (shareholders), directors and officers.

What are the advantages of a corporation?
As a separate legal entity, a Corporation is responsible for its debts and liabilities. If the corporation suffers losses, it must cover those with its own resources. The personal assets of the individual shareholders are not generally used to satisfy the debts and liabilities of the corporation. Therefore, a corporation protects the personal assets of its owners. There may also be tax benefits to the shareholders.

How do I reserve my corporate name?
CenterPoint Corporate Services will conduct a name search with the Secretary of State to determine if the name you want is available. It is usually best to choose three names to ensure that your company’s name will be distinct and identifiable from other companies. A corporation’s name must end with Inc., incorporated or corp.  Once you file your Articles of Incorporation, then the name you select is yours. If you want to reserve the name but you’re not ready to incorporate, CenterPoint Corporate Services can reserve the name for you.

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What are the Articles of Incorporation?
This is the document that is filed with the Secretary of State to incorporate a business. The minimum contents of the Articles of Incorporation are prescribed by statute.

What are the corporate bylaws?
Bylaws are the rules that govern the operation of a corporation. The Bylaws are commonly adopted by the directors and ratified by the Shareholders.

Who are the corporate officers?
Most states require three (3) statutory officers – President, Secretary and Treasurer. The officers are appointed by the directors. The officers are charged with carrying out the duties outlined in the bylaws. In most states, one person can be the sole shareholder, sole director and serve as the President, Secretary and Treasurer of a corporation.

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What is a corporate director?
Corporate directors have the responsibility of setting policy and oversight of the officers. The number of directors is designated in the Articles of Incorporation and/or the Bylaws. The initial directors are designated by the incorporator of the corporation. At the initial shareholder’s meeting, a new board of directors is elected by the shareholders.

How do I get a Federal Employer Identification Number (EIN)?
The EIN is issued by the IRS. CenterPoint Corporate Services can facilitate obtaining the EIN from the IRS when you choose one of our corporate packages.

Am I required to issue corporate stock?
Yes. Ownership is represented by the stock of the corporation. Common stock provides a proportionate interest in the corporation with regards, to 1) control, 2) earnings, and 3) net assets. A shareholder’s interest is generally in proportion to the number of shares he or she owns to the total number of shares issued.

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Is corporate ownership public record?
No. In Nevada, stockholders are not public record. However, corporations are required to maintain a corporate stock ledger that details the ownership of the stock.

How important is it to maintain corporate records?
Critical.  Forming a corporation in and of itself does not guarantee asset protection and separation of business and personal liability. There are numerous requirements for a corporation by law. A corporation must follow certain formalities including holding annual meetings, filing certain annual reports and having separate bank accounts to name a few. Should your corporation ever be involved in a lawsuit, the way you have run your company will determine the strength of your corporate shield.

What is a Registered Agent?
A corporation’s Registered Agent is a specific person or entity who is designated to receive certain legal documents (such as orders to appear in court) on behalf of the corporation. The Registered Agent must have a physical address in the state of incorporation. Every corporation must have a Registered Agent.

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Frequently Asked Questions - Limited Liability Companies

What is a Limited Liability Company?
A Limited Liability Company or LLC is a hybrid form of business enterprise that offers the limited liability of a corporation but with tax flexibility. An LLC can be taxed as a Proprietorship, a Partnership, a C-Corporation or an S-Corporation. In an LLC, the owners are called Members.

What are the advantages of a Limited Liability Company?
The Limited Liability Company was created fairly recently to address the business needs of our changing world. The owners, (members), are shielded from personal liability for the company’s business debts and liabilities. The members also have the added benefit of choosing the manner in which the company will be taxed. They may elect to allow the profit and losses to pass through to the members without any taxation on the entity as a Proprietorship, Partnership or S-Corporation. Additionally, the members can elect to self manage the company or have others manage the company. The LLC is a flexible and nimble business structure that allows a wide range of freedom in choosing how the business will be operated.

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How do I name my Limited Liability Company?
The owners of an LLC may choose any name they wish as long as it is not the same name of another LLC. It must be distinguishable and unique. CenterPoint Corporate Services will work with the Secretary of State to secure your LLC’s name as part of our formation packages. The name of an LLC must end with an LLC, L.L.C., limited-liability company, limited or Ltd.

What is an Operating Agreement?
An Operating Agreement is similar to a combination of a corporation’s Bylaws and a Shareholder’s Agreement in that it deals with the operations of the LLC and the relationship between the owners. The Operating Agreement sets forth the details regarding how the business will be managed and operated. State Statutes typically give members wide latitude in deciding for themselves the rules that will govern their organization.

What is the organizational structure of a Limited Liability Company?
The owners of an LLC are called Members. The Members can choose to manage the LLC directly or to appoint a Manager or a Board of Managers to manage the LLC. A Member can also serve an LLC as its Manager, just as a shareholder can serve a corporation as its director and/or as the officers.

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What is the difference between members and managers?
Members are the owners of the company. Managers run the day to day operations of the company as outlined in the operating agreement. Managers are not necessarily members. Members can be managers if they chose to member manage.

What are the tax advantages to a Limitied Liability Company?
One of the benefits of an LLC is the ability of the Members to choose its tax treatment. An LLC can choose to be taxed as a Proprietorship, (if owned by a single member or by a husband and wife filing a joint return), a Partnership, a C-Corporation or as an S-Corporation. You should always consult with your tax advisor for guidance as to which tax treatment is best for you.

Does the Limited Liability Company have stock shares like a corporation?
LLC’s do not issue stock. Instead, they issue membership units. In many ways, these can be similar to shares. Often membership units are issued to reflect the percentage ownership of the company instead of the number of shares.

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What other documents or formalities are required to run a Limited Liability Company?
While not mandatory in many states, an Operating Agreement can be a critical part of running an LLC. The operating agreement will typically contain provisions relating to management, how the profits and losses will be divided, the transfer of membership interest, whether the LLC will be dissolved on death or departure of a member and other important issues. Additionally, an Annual List of Members or Managers is required to be filed with the Secretary of State. It is also a good idea to hold an annual meeting of the members and to keep an annual report. These are all important steps in making sure that the “corporate shield” stays strong in the case of a legal dispute.

Does a Limited Liability Company have the same protections as a corporation?
Yes, an LLC protects its members and managers in much the same way that a corporation protects its shareholders, directors and officers.

Do I need a Registered Agent with a Limited Liability Company?
Yes, the law requires that an LLC, like a corporation, has a designated person or entity that is authorized to receive certain legal documents (such as orders to appear in court) on behalf of the company. The Registered Agent must have a physical address in the state of organization. Every LLC must have a Registered Agent.

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Frequently Asked Questions – Nevada

Why should I consider incorporating or forming my Limited Liability Company in Nevada?
Nevada law was written to provide the most protection for the owners and managers of businesses. Certain other states allow a judgment creditor to much more readily pierce the corporate veil and for the owners to be personally responsible for the debts and liabilities of the company. Nevada also has no entity level or personal income tax. Many tax practitioners recommend Nevada entities as a part of a tax strategy to minimize the liability of the business owner.

Must I be a Nevada resident to have a Nevada Corporation or Limited Liability Company?
No, it is not necessary to be a Nevada resident to incorporate or organize an LLC in Nevada. However, you will need to have a Registered Agent in Nevada that has a physical presence in Nevada.

If I incorporate or organize a Limited Liability Company in Nevada, do I need to do anything else to conduct business in different states?
Yes, you will need to qualify your company in the state or states where you will conduct business. CenterPoint Corporate Services can facilitate your qualification in any state where you will conduct business. You will also need to have a Registered Agent in each of the states where you are qualified to conduct business.

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